BILL ANALYSIS
SENATE COMMITTEE ON INSURANCE
Senator Jackie Speier, Chair
SB 559 (Brulte) Hearing Date: April 21, 1999
As Introduced: February 19, 1999
Fiscal: Yes
Urgency: No
SUMMARY
Senate Bill 559 would provide that a health care service
plan, a specialized health care service plan, a disability
or liability (health) insurer, a workers' compensation
insurer, an employer, or any other third party that is
responsible to pay for health care services provided to
beneficiaries, is not entitled to claim or pay a preferred
rate for health care services provided by health care
providers to beneficiaries, unless the payor is a qualified
payor meeting certain conditions.
DIGEST
Existing law
1. Regulates health care service plans through the
Department of Corporations.
2. Regulates disability (health) insurers through the
Department of Insurance.
This bill
1. Would require any workers' compensation insurer or a
self-insured employer, liability insurer that provides
coverage for hospital, medical, or surgical expenses, a
disability (health) insurer, a health care service plan
or a specialized health care service, who are payors
under this bill, to pay the provider's standard
nondiscounted reasonable charges for services rendered
to beneficiaries.
2. Provides that a payor shall reasonably demonstrate
that it is entitled to pay a preferred rate by virtue
of being a qualified payor within 30 days of receipt of
a written request from a provider. The failure of a
payor to reasonably and timely demonstrate that it is
entitled to pay a preferred rate shall render the payor
liable for the provider's standard nondiscounted
reasonable charges, which charges shall be due and
payable within 10 days of receipt of written notice
from the provider that a payor has not reasonably and
timely demonstrated its entitlement to a preferred
rate.
3. Provides that if a provider is required to take legal
action to collect its standard reasonable charges, it
shall be entitled to the greater of five hundred
dollars ($500) or an amount that is twice the
provider's standard reasonable charges, in addition to
reasonable attorney's fees and costs.
4. Provides that nothing in this bill is intended to
interfere with a payor' s right to establish or
determine eligibility or coverage of a beneficiary.
5. Provides that for purposes of this bill, the following
definitions apply:
(f) "Beneficiary" means an individual who
receives health care services from a provider,
which services are paid for by a payor.
(g) "Contracting agent" means an individual or
entity that, for monetary or other consideration,
sells, leases, assigns, transfers, or otherwise
conveys or arranges the availability of a
provider or provider panel to provide health care
services to beneficiaries. A contracting agent
may include, but is not limited to, a health care
service plan, a specialized health care service
plan, a third-party administrator, a preferred
provider organization, an independent practice
association, or a medical group.
(h) "Eligible beneficiary" means a beneficiary
whose care is being paid for by a qualified payor
pursuant to a program that provides direct
financial incentives to the eligible beneficiary
for utilizing a provider or provider panel, and
who is able to present, at the time of service, a
current identification card issued by the payor,
or is otherwise able to reasonably demonstrate,
at the time of service, current eligibility to
receive health care service at the preferred
rate. "Financial incentives" means reduced
copayments, reduced deductibles, or premium
discounts directly attributable to the use of a
provider panel.
(i) "Payor" means a health care service plan, a
specialized health care service plan, a
disability or liability insurer that provides
coverage for hospital, medical, or surgical
expenses, a workers' compensation insurer, an
employer, or any other third party that is
responsible to pay for health care services
provided to beneficiaries.
(10) "Payor summary" means a written
summary that includes, but is not limited to,
all of the following: The payor's name; the
type of plan, the type of payor, financial
incentives, if any, to beneficiaries to seek
care from a provider panel; the type of
coverage, including, but not limited to,
chiropractic, hospitalization, medical, dental,
and vision coverage; the method by which to
identify eligible beneficiaries; the method by
which to verify eligibility, authorization
requirements and procedures, copayment
requirements, and claim submission requirements
and procedures.
(aa) "Preferred rate" means the rate at which a
provider has agreed to provide services to
eligible beneficiaries and to other beneficiaries
under the conditions specified in this bill.
(bb) "Preferred rate agreement" means a written
agreement between a provider and a contracting
agent or a payor that clearly states the
preferred rate and includes a payor summary for
each payor entitled to pay the preferred rate or
clearly describes the types of payors and
applicable conditions under which a contracting
agent may offer or extend the preferred rate to a
payor or other contracting agent.
(cc) "Provider" means any person licensed as a
health care professional under various provisions
of California law. These include physicians,
chiropractors, dentists, surgeons and others.
(dd) "Provider panel" means a group of providers,
each of whom has entered into a preferred rate
agreement with a contracting agent, which
agreement permits the contracting agent to commit
a provider or a provider panel to the provision
of health care services to eligible beneficiaries
pursuant to a preferred rate, and to other
beneficiaries under conditions set forth in this
bill.
(ee) "Qualified payor" means any of the
following:
(1) A payor who is entitled to pay a
preferred rate for a provider's services by
virtue of meeting all of the following
conditions:
(i) The payor has entered into either a
preferred rate agreement with the provider,
or the payor has entered into a written
agreement with a contracting agent which
clearly discloses the parties to the
preferred rate agreement, and which
qualifies the payor to receive the preferred
rate;
(ii) The preferred rate shall apply only to
claims for eligible beneficiaries;
(iii) The preferred rate shall only apply
prospectively to services rendered;
(iv) The payor provides an explanation of
benefits that identifies the specific
preferred rate agreement whereby the payor
is entitled to pay a preferred rate for the
services rendered;
(2) A payor who has been
specifically authorized to pay the
provider's preferred rate for services to
the payor's beneficiaries.
(3) A payor who is entitled to pay
a preferred rate for a provider's services
by virtue of meeting all of the following
conditions:
(i) The payor has given the provider a
payor summary, written notice of the
payor's intent to apply the providers'
preferred rate, and a period of 30 days
for the provider to decline to
participate in any proposed agreement;
(ii) The preferred rate shall apply only
prospectively to services rendered after
the expiration of the period described in
clause (i);
(iii) The payor provides an explanation
of benefits that identifies the specific
preferred rate agreement whereby the
payor is entitled to pay a preferred rate
for the services rendered.
2. Provides that no payor shall be entitled to claim or
pay a preferred rate for health care services to
beneficiaries, unless the payor is a qualified payor.
3. Provides that a contracting agent shall disclose,
within 30 days of receipt of a written request from a
provider or a provider panel, the payor summary of each
payor with whom it has directly contracted, or the
name, address, telephone number, and contract name of
each contracting agent with whom it has directly
contracted.
8. Provides that a contracting agent shall not terminate,
limit, nonrenew, or otherwise impair any existing
contract or employment of a provider, or the
participation of a provider on a provider panel on the
basis that the provider refuses to contract with
additional payors pursuant to the provisions of this
bill.
COMMENTS
1. Purpose of the bill . The California Chiropractic
Association (CCA) and the California Healthcare
Association (CHA), co-sponsors, state that this bill is
needed to protect health care providers from being
forced to grant billing discounts, without their
knowledge or consent, to insurance entities with whom
the provider has no direct contractual relationship.
The co-sponsors believe the bill is necessary because
some health care service plans and other insurance
entities are "selling" their provider lists to gain
additional revenue and that this "doctor selling" is
becoming more commonplace. The CCA indicates, for
example, that a plan will sell its list of providers to
a company that sells automobile medical liability
insurance. When a provider bills that company for
medical services, the provider is told that the fee has
been discounted "in accordance with the contracted rate
the provider agreed to with the Plan." CCA indicates
that the provider had no knowledge that his or her name
had been sold, and did not agree to discount fees to
another insurance entity.
Without notification of the "sale" or benefit from the
"purchaser," the provider is an unwitting hostage to
the contracting plan. CCA believes that this bill
levels the playing field by giving providers the right
to approve or reject the sale of their names without
the fear of contract termination or non-renewal.
2. Support . The California Chiropractic Association (CCA)
believes the bill addresses the abusive practices by
silent preferred provider organizations (PPOs) whereby
health care providers are victimized by billing schemes
to create payment discounts for payors who are not
entitled to them. CCA believes that fraudulent "silent
PPOs" are unfair, not only to providers, but also to
employers and patients.
CCA states that this bill is needed because improper
discounts cost hospitals and physicians large amounts
of money. When providers choose to grant a discounted
fee, they expect to benefit from this arrangement,
usually by referral of enrollees. This fraudulent
discounting is very difficult to track. Staff isn't
likely to discover the mistake because it's very time
consuming to compare each explanation-of-benefits form
with every patient's insurance coverage.
3. Opposition unless amended . The Personal Insurance
Federation of California is opposed unless this bill is
amended to address the following concerns: The
definition of "eligible beneficiary" is too narrow; the
preferred rate is prospective; the explanation of
benefits creates an undue administrative burden; the
provider is given too much latitude to pick and choose
network participation; payors' obligations should be
established by contract, not law; and existing contract
dispute remedies elsewhere in law are sufficient and
the remedies in this bill are unneeded.
4. Concerns . The California Association of Health Plans
(CAHP) has concerns that this bill could interfere in
contractual relationships that are ethical and
conducive to increased business for both plans and
providers. Additionally, CAHP is concerned that this
bill would allow providers to opt out of networks on a
payor-by-payor basis. Finally, this bill would require
complex disclosures and billings.
5. Past Legislation. SB 2209 (Brulte), 1997-98, would
have required specified managed care organizations and
insurers to disclose to each of their paneled health
care providers specified information about each
third-party payor with whom they contract to provide
health services, and would establish penalties for
noncompliance. SB 2209 was approved by this committee,
but failed passage in the Senate Appropriations
Committee.
POSITIONS
Support
California Chiropractic Association (co-sponsor)
California Healthcare Association (co-sponsor)
Oppose unless amended
Personal Insurance Federation of California
Oppose
Blue Cross
California Association of Health Plans
Consultant: Michael Miiller